Agriculture giant Monsanto to cut 2,600 workers over two years
The struggling company says it will generate between $275 million and $300 million in annual savings by the end of fiscal 2017
WASHINGTON—Monsanto Co. says it will eliminate 2,600 jobs as part of a cost-saving plan designed to deal with falling sales of its biotech seeds and herbicides, which pushed its quarterly losses deeper into the red.
The job cuts will reduce the company’s 22,500-employee workforce by about 12 per cent over the next two years. Its shares dropped more than 2 per cent in morning trading Wednesday.
The St. Louis-based agricultural giant said the move will generate between $275 million and $300 million in annual savings by the end of fiscal 2017. The cost of the reorganization _ which will streamline sales, R&D and other departments _ is estimated at $850 million to $900 million.
Monsanto has struggled in recent quarters to deal with slumping corn prices in the U.S., which have reduced demand for its bestselling product: genetically-enhanced corn seeds. Farmers are shifting more acres to other crops due to a surplus of corn from last year’s harvest. Even with that shift, 2015 is expected to bring the third-largest corn harvest on record, squashing prices and limiting farmers’ profits.
Monsanto’s biotech seeds have genetically engineered traits that help farmers increase their crop yield, despite their higher costs.
Monsanto announced the lay-offs as it reported a $495 million loss for its fiscal fourth quarter.
The company posted a net loss of $495 million, or $1.06 per share, compared with a net loss of $156 million, or 31 cents per share, a year ago. Losses, adjusted for one-time gains and costs, were 19 cents per share. The average estimate of eight analysts surveyed by Zacks Investment Research was for a loss of 1 cent per share.
The company’s sales also missed Wall Street forecasts, falling more than 10 per cent to $2.36 billion during the period. Four analysts surveyed by Zacks expected $2.89 billion.
Sales of Monsanto’s bestselling product, biotech corn seeds, fell 5 per cent to $598 million. Meanwhile, the company’s chemical business, led by Roundup weed killer, also fell 12 per cent to $1.1 billion.
Noting “several global and industry headwinds” Monsanto said it expects full-year earnings in the range of $5.10 to $5.60 per share. The company also said it will repurchase $3 billion in shares under an accelerated buyback plan expected to wrap up in the next six months.
In late August Monsanto announced it was abandoning its takeover bid for competitor Syngenta AG after the Swiss chemical producer rejected an offer of nearly $47 billion.